Transgenic mice that express elevated levels of IFN-gamma mRNA and protein were produced by inserting murine IFN-gamma genomic DNA containing an immunoglobulin delta chain enhancer in the first intron. IFN- transgenic mice show a pronounced reduction in B-lineage cells in the bone marrow, spleen and lymph nodes. All bone marrow B220+ cells are arrested in their development as CD43+ pro-B cells. The immunoglobulin heavy chain locus has undergone DH to JH rearrangement but no V to D rearrangements were detected. PCR amplification studies conducted on whole bone marrow RNA failed to detect the presence of transcripts from genes expressed early in B cell development such as V-preB, delta5, Igalpha and Igalpha. Rag-1 and Rag- 2 transcripts were also undetectable. TdT transcripts were detected. Addition studies are being conducted on RNA purified from enriched populations of B220+ bone marrow cells in order to analyze a more specific set of transcripts and resolve the question of Rag gene expression.